Davis v. Farmers Ins. Co. of Arizona, 25,312.

• Decision Date: 13 June 2006
• Docket Number: No. 25,312.,25,312.
• Citation: 2006 NMCA 099,142 P.3d 17
• Parties: Robert DAVIS, Individually and as a Representative of a class of persons within the State of New Mexico, Plaintiff-Appellant, v. FARMERS INSURANCE COMPANY OF ARIZONA, and each affiliate within Farmers Insurance Group, a joint venture, Defendants-Appellees.
• Court: Court of Appeals of New Mexico

142 P.3d 17

2006 NMCA 099

Robert DAVIS, Individually and as a Representative of a class of persons within the State of New Mexico, Plaintiff-Appellant, v. FARMERS INSURANCE COMPANY OF ARIZONA, and each affiliate within Farmers Insurance Group, a joint venture, Defendants-Appellees.

No. 25,312.

Court of Appeals of New Mexico.

June 13, 2006.

Certiorari Granted, No. 29,895, September 13, 2006.

As Revised September 13, 2006.

COPYRIGHT MATERIAL OMITTED

Morgan Law Office, Limited, Ron Morgan, Whitney Buchanan, P.C., Whitney Buchanan, Albuquerque, NM, for Appellant.

Rodey, Dickason, Sloan, Akin & Robb, P.A., Andrew G. Schultz, Albuquerque, NM, Jackson Walker, L.L.P., Thomas T. Rogers, Mark L. Walters, Austin, TX, for Appellees.

OPINION

KENNEDY, Judge.

{1} The dispute in this case concerns coverage under an automobile insurance policy. The question in this appeal is whether, under Plaintiff's collision coverage, Farmers Insurance Company (Farmers) must pay for the vehicle's loss of market value on top of adequately repairing the damaged vehicle. The trial court granted summary judgment in favor of Farmers and Plaintiff appeals.

{2} This is an issue of first impression in New Mexico. There is a nationwide split in authority on whether, under policies like Plaintiff's, insureds can recover the diminished market value of their vehicle after having the vehicle fully and adequately repaired. While this question must always depend upon the actual language of the insurance policy, the language in certain coverage provisions has been analyzed extensively in other jurisdictions. Today, we choose to follow the majority trend towards disallowing recovery for the diminished market value under the terms of Plaintiff's insurance policy. We affirm.

BACKGROUND AND FACTS

{3} Two months after buying a new truck, Plaintiff wrecked it. He was insured by Farmers, who adequately repaired the truck. After the repairs were completed, Plaintiff traded his truck in for another new one. Plaintiff accepted as a trade-in value $15,000 less than he estimated his old truck was worth before it was wrecked. Plaintiff then claimed that he was entitled to payment for this "loss in market value" under his insurance policy. Farmers disagreed, and refused to pay this claim.

{4} Part IV of Plaintiff's insurance policy stated that Farmers would "pay for loss to your insured car caused by collision." This section defined "loss" as the "direct and accidental loss of or damage to your insured car, including its equipment." In the "Limits of Liability" section, the policy stated that Farmers' "limits of liability for loss shall not exceed . . . [t]he amount which it would cost to repair or replace damaged . . . property with other of like kind and quality; or with new property less an adjustment for physical deterioration and/or depreciation." In the "Payment of Loss" section, Farmers stated that it would "pay the loss in money or repair or replace damaged . . . property."

{5} Plaintiff filed a complaint against Farmers claiming: (1) breach of contract, (2) violation of the covenant of good faith and fair dealing, (3) violation of the New Mexico Insurance Code, (4) violation of the New Mexico Unfair Practices Act, and (5) breach of fiduciary duty. Farmers moved to dismiss the complaint and Plaintiff moved for summary judgment. The trial court denied Plaintiff's motion for summary judgment and granted summary judgment in favor of Farmers. Plaintiff appeals and we affirm.

DISCUSSION

Standards of Review and Policy Interpretation

{6} "Summary judgment is appropriate where there are no genuine issues of material fact and the movant is entitled to judgment as a matter of law." Self v. United Parcel Serv., Inc., 1998-NMSC-046, ¶ 6, 126 N.M. 396, 970 P.2d 582. Where issues on appeal involve only questions of law, we review those questions de novo. Id.

{7} The issue in this case concerns the interpretation of Plaintiff's insurance policy. We construe the insurance policy as a whole and determine whether ambiguities exist in the language of the contract. See Rummel v. Lexington Ins. Co., 1997-NMSC-041, ¶¶ 19-20, 123 N.M. 752, 945 P.2d 970. When a term is undefined in the policy, we may look to that term's "usual, ordinary, and popular" meaning, such as found in a dictionary. Battishill v. Farmers Alliance Ins. Co., 2006-NMSC-004, ¶ 8, 139 N.M. 24, 127 P.3d 1111 (internal quotation marks and citation omitted). A split in legal authority may be indicative of an ambiguity in the policy, but does not establish one. Allgood v. Meridian Sec. Ins. Co., 836 N.E.2d 243, 248 (Ind.2005). When, and only when, an ambiguity is found, do we liberally construe the policy in favor of the insured. Battishill, 2006-NMSC-004, ¶ 17, 139 N.M. 24, 127 P.3d 1111.

{8} We give the language in the policy its plain and ordinary meaning. Cooper v. Chevron U.S.A., Inc., 2002-NMSC-020, ¶ 16, 132 N.M. 382, 49 P.3d 61. We do not "strain or torture" the language in order to "create an ambiguity." State Farm Mut. Auto. Ins. Co. v. Luebbers, 2005-NMCA-112, ¶ 9, 138 N.M. 289, 119 P.3d 169 (internal quotation marks and citation omitted), cert. granted, 2005-NMCERT-8, 138 N.M. 330, 119 P.3d 1267. "[T]he issue is how a reasonable insured would understand the term at the time of purchase." Battishill, 2006-NMSC-004, ¶ 11, 139 N.M. 24, 127 P.3d 1111. If the language in the policy is clear, this Court must then enforce the contract as written. See Ponder v. State Farm Mut. Auto. Ins. Co., 2000-NMSC-033, ¶ 11, 129 N.M. 698, 12 P.3d 960.

"Loss" Does Not Include "Loss in Market Value" Under Plaintiff's Policy

{9} Plaintiff's primary argument is that his policy should be broadly interpreted to include diminished market value plus the cost of repairs. In other words, Plaintiff claims that the phrase "direct and accidental loss of or damage to your insured car" must be interpreted broadly to include any type of "loss," including the diminished market value of his vehicle. We disagree.

{10} In the policy, the definitions of "loss" were set out in the alternative: loss was either the "loss of" the truck or "damage to" the truck. The plain meaning of "loss of" a vehicle in a collision is that the vehicle was a complete loss. See 6 John Alan Appleman & Jean Appleman, Insurance Law & Practice § 3881, at 359 (1972) (stating that the "total loss" of a vehicle occurs "when the cost of repairs exceeds the value of the vehicle, or where the automobile cannot be restored to the same condition as before the accident"). Here, Plaintiff concedes that there was not a "total loss" of his truck. Instead, there was "damage to" the truck, which was satisfactorily repaired. While the vehicle's reputation might suffer after a collision, any "damage to" the truck must be "direct" under Plaintiff's policy. See Black's Law Dictionary 964 (8th ed.2004) (defining a "direct loss" as a "loss that results immediately and proximately from an event" and a "consequential loss" as a "loss arising from the results of damage rather than from the damage itself . . . [a]lso termed indirect loss"); see also Webster's Third New International Dictionary (unabridged) 640 (1993) (variously defining "direct" as "marked by absence of an intervening agency, instrumentality, or influence: IMMEDIATE," "stemming immediately from a source," "characterized by or giving evidence of a close esp. logical, causal, or consequential relationship," and "INEVITABLE"); see also Cooper, 2002-NMSC-020, ¶ 16, 132 N.M. 382, 49 P.3d 61 (stating that policy language must be given its plain and ordinary meaning).

{11} Plaintiff's loss of market value cannot be shoe-horned into the coverage for direct damage to his truck. See Ponder, 2000-NMSC-033, ¶ 11, 129 N.M. 698, 12 P.3d 960. Contrary to Plaintiff's arguments, the policy's language cannot be interpreted as broad enough to "cover any loss to the pre-collision position of the consumer" and does not contain a promise to compensate the insured with the full panoply of damages available in tort.

Plaintiff May Not Recover Under the "Limits of Liability" Section of His Policy

{12} Plaintiff contends that, because neither the "Exclusions" portion nor other portions of the policy excludes loss of market value from the broad definition of "loss," the policy must provide coverage for diminished market value. Contrary to Plaintiff's suggestion, it was not necessary for Farmers to specifically exclude a loss in market value unless the insurance policy, when read as a whole, actually includes such coverage. See Am. Mfrs. Mut. Ins. Co. v. Schaefer, 124 S.W.3d 154, 160 (Tex.2003) ("Absence of an exclusion cannot confer coverage."). We have already discussed how such coverage is not included in the "Loss" section of Plaintiff's policy. To read the policy as a whole, we must now consider this provision in relation to the rest of the policy to determine whether the policy extends coverage to include diminution in value following repairs. See Rummel, 1997-NMSC-041, ¶ 20, 123 N.M. 752, 945 P.2d 970.

{13} The "Limits of Liability" section of Plaintiff's policy reads:

Our limits of liability for loss shall not exceed:

1. The amount which it would cost to repair or replace damaged or stolen property with other of like kind and quality; or with new property less an adjustment for physical deterioration and/or depreciation.

This section, set forth in the disjunctive, allows Farmers to repair or replace at its option. It is not contested either that Farmers chose the former option or that this case does not involve repairs that were inadequate or somehow problematic.

{14} Farmers limited its liability to an amount that would "not exceed . . . [t]he amount which it would cost to repair or replace damaged . . . property." Farmers contends that this language unambiguously does not constitute a promise to pay for diminished market value. We agree.

{15} The "repair" of a physical thing (like a vehicle) is commonly defined as ...